Trepp Loss Analysis Shows Plunge in Volume, Severity Readings

The volume of CMBS conduit loans liquidated in February retreated sharply, falling 43 percent from January's reading, according to real estate research firm Trepp LCC. The February reading was the lowest total since November 2010.

At $893 million, Trepp reported that liquidations were about 32 percent below the 12-month moving average of $1.31 billion per month. Since the beginning of 2010, the special servicers have been liquidating at an average rate of about $1.08 billion per month.

In February, liquidations came from 93 loans. This compares to 168 loans that were liquidated in January. The 12-month moving average is 151 loans per month.

The average loan size for liquidated loans was $9.6 million in February. Over the last 12 months, the average size of liquidated loans has been $8.7 million.

The losses in February amounted to $228 million—representing an average loss severity of 25.55 percent. This was down by more than 14 points from January's 39.54 percent reading. February represented the lowest severity level since March 2011 and is below the 12-month rolling average of 42.27 percent.

However Trepp did point out that taking loans with losses of less than two percent reveals a different picture. The firm wrote, “As we've noted before, we suspect that in many cases, the small loss loans are actually refinancings that have taken place where the losses reflect small, unpaid special servicer fees or other costs.”